Is Become Your Own Banker (BYOB) a Scam?

I’m getting more and more of these plans coming across my desk so I thought it was time to put out another warning newsletter. If you want to learn specifically why I don’t like BYOB (more detail than I can put in a one-page newsletter), you should sign up for the WEBINAR.

Explaining the Flaws with BYOB–WEBINAR on Recording

Click on the following link to watch an eye opening webinar on BYOB:

Do you have satellite radio? If you do, you have heard the constant ads about BYOB. I am sick of hearing these ads and wanted to warn advisors about this sales platform.

What is BYOB?

BYOB (also known as Bank on Yourself, Your Family Bank, and Infinite Banking Concept) revolves around the idea of “creating your own bank” so you can “borrow from yourself” instead of a third party lender like a bank. Most people hate paying lenders and therefore, the idea of borrowing from yourself sounds interesting to many who first hear about it.

Is BYOB a scam? You tell me if the following bullet points give rise to calling a sales concept a scam:

                -confuses clients
                -doesn’t use math that adds up
                -doesn’t compare itself to other better wealth-building tools
                -is sold by agents who don’t understand what they are selling
                -incorrectly tells clients that a specific type of life policy must be used to make it work  

Scam is probably too strong a word to use for the BYOB concept. Saying it’s a concept that consumers are sold without understanding it and if they did they wouldn’t use it should suffice.

What wrong with BYOB?

In short, BYOB is an A-S-S backwards sales concept that misses the point of using Cash Value Life insurance as a wealth-building tool. It makes no financial sense to fund a policy for seven years and then borrow from it in year eight to buy a car. It makes even less sense to borrow from a life insurance policy to pay off home mortgage debt. The BYOB concept is the opposite of using other people’s money to grow wealth; and in an age with historically low lending rates, such a sales approach simply makes no sense.

It also makes no sense to use whole life insurance as the tool of choice with BYOB when an IUL (Indexed Universal Life) policy is clearly a better option (even if you use IUL, BYOB still makes no mathematical sense).                   

Other People’s Money 

If a lender would lend you money at 3.5%* where you knew you had the reasonable likelihood of generating returns 6-7%, how much money would you borrow from the lender? The answer should be as much as they will give you.

When you use a lender’s money at a reasonable interest rate, it frees up your money to build elsewhere for retirement. Many insurance agents selling BYOB don’t understand this. If they did, they wouldn’t be selling the BYOB concept, they’d be offering Cash Value Life to build wealth for retirement (NOT to buy a car).

BYOB protects the client from rising interest rates

BYOB agents tout that the concept is protecting clients by creating their own bank so they don’t have to rely on lenders.

What they fail to understand is that when you properly fund and use Cash Value Life for retirement purposes, you are also creating an emergency pool of money. The only difference is that you are not funding it with the intent to borrow from it in year eight to buy a car (which mathematically makes no sense). If an emergency comes along, the cash in the policy can be borrowed from. If no emergency, then the cash is allowed to grow tax-free for years and can be used in retirement (the ultimate goal of most clients).


I’ve talked with so many BYOB Kool-aid drinkers over the years I’ve lost count. I’ve never talked with one who compared the BYOB concept to other wealth-building tools to create retirement cash flow. Any sales concept that is sold in a vacuum (not comparing it to other alternatives) is a disingenuous sale.

For any BYOB Kool-aid drinkers who think that they can put in front of me a fact pattern where BYOB is the best wealth-building tool for clients, I’ll take that challenge. E-mail me at and if I’m wrong, next week’s newsletter will be telling readers I’m wrong.

*While intentionally funding cash value life so you can buy a car in 5-7 years makes little sense, the use of a cash value life policy as an asset to be used when needed for cash flow can make sense if interest rates exceed 6-7%. For example, if you funded an IUL for retirement and in year 7, 10, 15 of the policy (when you have significant cash in it), if you wanted to buy a car where interest rates were 7%, then it may, in fact, make sense to borrow short term from your policy.

College Planning Using Cash Value Life – Does it Work? 

If you didn’t see last week’s newsletter, you didn’t get a chance to download my 10-Page White Paper which has several examples of when Cash Value Life (CVL) for college planning doesn’t work and one where it does. To read, click on the following link:

Roccy DeFrancesco, JD, CAPP, CMP